According to a recent industry survey, more than two thirds of health insurers are planning to enhance their marketing and sales capabilities in the near term. They regard initiatives to drive higher effectiveness in customer acquisition and retention, brand development and go-to-market strategy as critical moves to create competitive advantage, moves that are perhaps as important as keeping medical costs in check.
There are at least three reasons why they are right:
- Individual consumers will be much more involved in health insurance choices. There will be more of them, they will be better informed and they will have a market place that facilitates comparison-shopping. Engaging consumers effectively will also be critical to help manage outcomes, which in turn is an important element in containing medical costs. The industry is shifting from a business-to-business model to more of a business-to-consumer model. This requires significant transformation of consumer relationships that historically have frequently been more adversarial than built on trust.
- Employers are rethinking their health benefit strategies. Depending on specific conditions like size, hiring and retention goals, labor market conditions etc., employers’ priorities and benefit strategies will change and diverge significantly. Health insurers must keep the pulse on their evolving needs, create stronger differentiation through products and services, tailor their offering, and become more impactful in bringing the value proposition across. In many cases this means that insurers must get much closer to employers than they currently are.
- Health insurers have to build and diversify their revenue streams. Even though 30-plus million of formerly uninsured consumers will enter the market, growth in the core business will be primarily in the less profitable segments. In addition, the new net premium fee will significantly depress insurers’ margins, which with 4.4% today are already anything but stellar. To make up for the profit shortfall, health insurers are aggressively looking to drive incremental revenue through new customer segments, cross-selling new insurance products, offering new services like health IT and data solutions, or medical and wellness management. Going-to-market with new products, to new customers, in some cases to new geographies – all potentially in combination – is a significant challenge. It will stretch and may go beyond current marketing and sales capabilities – in particular of the broker channel.
He is Managing Principal, Healthcare Insurers and Payers at ZS Associates.
This post is the author’s own and does not necessarily represent ZS Associates’ positions, strategies or opinions.